US-Mexico Strike Trade Deal; Trump wants to terminate Nafta

08/28/2018

United States Donald Trump wants to cancel the North American Free Trade Agreement in its current form and announced that a new trade agreement between the United States and Mexico has been formed which he described as "one of the largest trade deals ever made."

"I'll be terminating the existing deal and going into this deal," Trump said at the Oval Office. He called the day as a big one for trade.

Trump however said that it was now up to Canada to join the new trade agreement hinting at the possibility of separate agreements.

Trump called up the Mexican president Enrique Peña Nieto sitting at the Resolute Desk in White House and spoke to him over the speaker phone while the media watched and recorded the conversation. The Mexican president congratulated Trump over the success of the negotiations and hoped that an agreement can be reached between the us and Canada.

Before this conversation with the Mexican President the same day, Trump had said that he wanted to eliminate the name Nafta because it has bad connotations. He said he planned to call the deal the "United States-Mexico Trade Agreement" instead. The U.S.-Mexico deal was called a “preliminary agreement in principle, subject to finalization and implementation” by the United States Trade Representative.

“They used to call it NAFTA, we are going to call it the United States-Mexico Trade Agreement, and we will get rid of the name NAFTA,” Trump said. “It has a bad connotation because the United States was hurt very badly by NAFTA.”

The deal between the two countries was also described by Trump as being amongst the largest trade deals. There were some serious sticking issues between the two countries including those in energy and automobiles.

The new trade agreement includes new rules about origin aimed at incentivizing manufacturers to source goods and materials in North America with a requirement of sourcing 75 percent of auto content from the United States and Mexico.

Optimism over a deal was still expressed by officials in Canada.

“Canada is encouraged by the continued optimism shown by our negotiating partners,” a spokesman for Canada's minister of foreign affair, Chrystia Freeland, said Monday. “Progress between Mexico and the United States is a necessary requirement for any renewed NAFTA agreement.”

The Nafta agreement between the US, Mexico and Canada had been repeatedly been called “the worst trade deal maybe ever signed anywhere” by the then presidential candidate Trump in his elections speeches.

The U.S. and Mexico strove hard to get to an agreement by this month so that it could be ratified before the Mexican President-elect Andrés Manuel López Obrador’s inauguration in December.

Car manufacturing jobs was amongst the biggest issues in the negotiations as the Trump administration had been striving to get a deal that would increase employment in the car factories in the US.

While agreeing to a tariff rate of 2.5 per cent for cars that are made at the existing factories, the US left open the scope for imposing tariffs of 20 top 25 per cent if cars are made in new plants.